How a trade war could harm the marijuana industry

If a full-blown U.S.-China trade war erupts, a slew of consumer goods could be subject to as much as 25% in tax. On the hit list: imported, Chinese-made vaping devices.

That could have far-reaching consequences for the vaporizer industry, as well as the booming stateside cannabis industry.

Currently, nine states plus the District of Columbia allow recreational marijuana use, and 30 states and D.C. permit some form of medical marijuana, which is used to treat cancer patients and those with chronic pain or PTSD, among other ailments. More states are likely to follow suit.

As a result, legal sales of marijuana are projected to jump to more than $20 billion by 2022, from approximately $10 billion in 2018, according to Marijuana Business Daily. Estimates from a private research report show even greater growth.

Much of the cannabis and cannabis concentrates on the market today are grown and sold in the U.S., but the devices used to consume them are manufactured in China. Those devices can cost anywhere from $50 to $500, depending on the type.

That's where a trade war threatens to put a stranglehold on the marijuana market.

Firms that import vaping products will have to either absorb the additional cost of the tariff, source production in another country or increase the prices charged to consumers.

However, the profit margin on those devices is only between 10% and 15% and few alternatives exist for making them. As a result, the extra cost of the tariff will be largely passed on to consumers by way of higher prices.